EverCommerce Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. EverCommerce provides vertically focused SaaS, payment and marketing solutions to service-based small and medium-sized businesses; it reported more than 600,000 customers across home, health, and fitness and wellness services.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $158.1 million | $128.5 million | $458.9 million | $354.5 million |
| Operating loss | $7.3 million | $4.1 million | $26.9 million | $21.4 million |
| Net loss | $15.9 million | $36.9 million | $42.0 million | $77.2 million |
| Adjusted EBITDA (non-GAAP) | $30.2 million | $29.0 million | $83.9 million | $77.9 million |
| Cash provided by operating activities | — | $37.6 million | $13.7 million |
Revenue and margins: Q3 revenue increased 23.0% year over year; nine-month revenue rose 29.5%. Subscription and transaction fees grew 30.8% in Q3 and 36.3% for nine months, while marketing technology revenue grew 14.8% and 13.9%, respectively. Management’s acquisition-inclusive pro forma revenue growth was 12.7% for Q3 and 16.1% for nine months. Q3 GAAP gross margin was approximately 60.1%; adjusted gross margin was approximately 63.5%. Operating margin was approximately negative 4.6%, and net margin approximately negative 10.0%.
Q3 cost of revenue increased faster than revenue, rising to 36.5% of revenue from 33.4%; for nine months it was 35.6% versus 33.7%. Product development expense rose to 11.7% of revenue from 9.9% in both comparison periods. The company continued to report GAAP losses, although net loss improved substantially year over year, in part because 2021 included a $28.7 million debt-extinguishment loss. Q3 interest expense increased 72.7% to $8.9 million, which management attributed primarily to higher effective borrowing rates.
Cash flow and liquidity: Nine-month operating cash flow was $37.6 million, compared with $13.7 million a year earlier. Investing activities used $13.6 million, mainly for $11.4 million of capitalized software costs; financing activities used $24.6 million, primarily reflecting $21.9 million of share repurchases. Cash, cash equivalents, and restricted cash totaled $95.2 million at quarter-end. The company had $190.0 million available under its revolver and $544.5 million outstanding on term loans; total debt principal, including a subordinated note, was approximately $547.3 million. Management said existing cash, revolver availability, and operating cash flow should be sufficient for working capital, planned capital expenditures, and debt service for at least 12 months.
Material changes and notable items
- Revenue growth included $12.5 million in Q3 and $37.4 million year to date from acquisitions completed after September 30, 2021. No acquisitions were completed in the first nine months of 2022; comparisons therefore reflect acquisition contributions from prior-year purchases.
- Cash declined modestly from $98.3 million, including restricted cash, at the start of 2022 to $95.2 million at September 30. Debt carrying value was $540.3 million at quarter-end, versus $546.1 million at year-end 2021.
- The company repurchased 2.1 million shares for $21.9 million during the first nine months under a $50 million authorization. On November 7, after quarter-end, the board authorized an additional $50 million and extended the program through December 31, 2023.
- On October 31, after quarter-end, the company entered a five-year interest-rate swap covering $200 million of term loans, at a fixed rate of 4.2295%, to reduce floating-rate exposure.
- Foreign-currency translation losses were $15.8 million for the first nine months, compared with $2.5 million a year earlier. Goodwill and intangible assets were $907.2 million and $430.2 million, respectively, at quarter-end.
Outlook, risks, and contingencies
The filing provides no numerical revenue or earnings guidance. Management expects investment in sales and marketing, product development, and infrastructure to continue. It cited inflation, a stronger U.S. dollar, rising interest rates, supply-chain disruptions, and COVID-19-related uncertainty as potential pressures on demand, costs, and results. Other highlighted risks include acquisition execution and integration, customer retention and expansion, competition, payment-processing dependencies, cybersecurity and service interruptions, and the company’s substantial debt. Debt is secured by substantially all company assets; the company reported covenant compliance at September 30, 2022. The company said it knew of no legal proceedings expected to have a material adverse effect. It planned to adopt the new lease standard in Q4 2022; management expected balance-sheet lease assets and liabilities but no material income-statement impact, while its assessment remained incomplete.
Key facts for investors to verify
- How much reported growth reflects underlying customer and transaction growth versus acquired businesses; pro forma growth is not organic growth.
- Whether rising direct costs, product-development spending, and interest expense affect future margins and progress toward GAAP profitability.
- Cash generation, debt maturities, floating-rate exposure, and the effect of the $200 million interest-rate swap.
- The liquidity and capital-allocation implications of the expanded $100 million repurchase authorization alongside acquisition plans and debt service.
- Whether foreign-exchange movements, macroeconomic pressures, and goodwill or intangible-asset valuations create further financial impacts.